My local health store recently held a sale in which they slashed their own-label prices by 50%, and as I wandered round their store I asked myself: By cutting their prices in half, how on earth did they intend to make a profit? However, I didn't give the question too much thought at the time ... I had more important things on my mind ... like bargain hunting.
Then as I sat down to write this article, it suddenly occurred to me what they were trying to do: they were trying to make their profit on the sales AFTER the sale - the BACKEND SALES.
You see, I ended up buying lots of their stuff at the discounted prices ... but, sooner or later, my supply of these is going to run out and I am going to have to go back, only next time I'll be paying full prices! In other words, by offering an initial discount on their products they are hoping to gain me as a LONG-TERM customer. Sneaky, huh!
Actually, this is nothing new in the world of marketing. For instance, magazines do this all the time. They offer you, say, 13 issues free or at a massive discount, in the hope that by the time you've read all 13 issues you'll be so hooked on the content you'd be more than willing to pay full price to continue your subscription.
Clearly they believe they will generate more revenue in the long run than it costs to offer you the special 13 issue discount. They know the LIFETIME VALUE of having you as a subscriber.
What about you? Do you know the lifetime value of your customers? Or do you simply see the short-term profits?
Acquiring a new customer is really only the START of the buyer-seller relationship. Once a customer buys from you, if they are satisfied with your product they are much more likely to do business with you again. In fact, they are TEN TIMES more likely to buy from you if they have already purchased one of your products, than if you were trying to sell to them "cold".
It is because of this that it's ESSENTIAL to have a BACKEND product - something you can sell to customers AFTER they have made an initial purchase.
Let me give you an example of this. A colleague of mine sells two products - one priced at $15, the other at $100. He sells the $15 product at cost, which means he makes no profit per sale. He advertises this product like crazy and gets tons of sales, but makes no profit from the sales. However, his $100 product is not advertised at all, yet he gets a steady stream of sales of this product each month, and makes a huge $50 profit on each unit sold!
So what's going on? Simple ... he makes his profit from BACKEND sales.
The cheaper product costs him $15 to make and promote, so his line of reasoning is thus: "Why bother trying to make a profit from my cheaper product? Why not simply sell it AT COST, sell as many as possible, and then offer the more expensive product ONLY TO MY CUSTOMERS?"
This strategy was and still is IMMENSELY successful, for two reasons:
(1) His customers had already broken through the "trust" barrier by buying his cheaper product. They saw that his products were useful and good value for money, so they assumed that his more expensive product would be the same.
(2) His more expensive product, was highly relevant to those who had purchased his first, and since the only people he sold it to were already HIGHLY QUALIFIED prospects, his sales ratio was much higher and his marketing costs were virtually nil!
Let's step back for a moment and ask, How did he know this was going to work in the first place? The answer is, he didn't. At first he tried to sell both at a profit, and found that while he could sell quite a few of the cheaper product, he was making very few sales of the $100 product. Then he tried an experiment. He dropped the price of his cheaper product dramatically, and concentrated all his
efforts on marketing JUST THAT ONE product. His sales skyrocketed. Then, to each of his customers he would write a "thank you for purchasing" letter with details of his more expensive product. So many customers went on to buy his second product that his overall profit after the experiment increased by 120%!
I deliberately avoided mentioning what type of products he sells for one very simple reason - it doesn't matter! The point is that this concept of BACKEND SALES can be applied to just about ANYTHING you sell on the Web, whether it be vitamins, electronic products or virtual widgets. People buy because they perceive they have a need - in the case of vitamins, for instance, the need for health and wellbeing. If, after making them a customer, you can further satisfy that need, your sales will skyrocket!
If you are selling only one product on the Web at the moment, why not get a backend product to sell RIGHT NOW? If you don't have one of your own, you can almost certainly find an affiliate program on the Web that will pay you to sell their products. http://www.associateprograms.com/ gives a comprehensive list of programs you can join.
For maximum success,
(1) find a product that your customers will find useful,
(2) sell the product as part of your "thank you" letter, and
(3) watch your sales and profits multiply!
By using backend sales, you can easily expect to see your sales double or even treble ... all by going that one extra step to satisfy your customer's needs!
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